Recorded a $564 million impairment charge related to Melaka Refinery
investment

Strengthened balance sheet with $1.0 billion debt reduction

Returned more than $400 million of capital to shareholders through
dividends and share repurchases

Received board approval for a 25 percent increase in the annual
dividend rate and a $1.0 billion expansion of the share repurchase
program

Announced intent to form a master limited partnership

January 30, 2013 08:00 AM Eastern Standard Time

HOUSTON--(BUSINESS WIRE)--Phillips 66 (NYSE: PSX) announces fourth-quarter earnings of $708
million and adjusted earnings of $1.3 billion. This compares with
earnings of $2.0 billion and adjusted earnings of $379 million during
the fourth quarter of 2011.

“Strong realized refining and chemicals margins improved our earnings
during the quarter,” said Greg Garland, Phillips 66 chairman and chief
executive officer. “Our $1 billion debt reduction strengthens our
financial flexibility and resulted in a 25 percent debt-to-capital ratio
at the end of the year. We were pleased to return more than $400 million
in capital to shareholders in the quarter while also funding new
investments including the Sand Hills and Southern Hills pipeline
projects. We also announced our intent to contribute a portion of our
transportation assets to form a master limited partnership, which we
expect will highlight the value of our logistics and infrastructure
assets, and serve as an efficient vehicle for funding growth
investments.”

“The company’s solid financial performance in 2012 was underpinned by
safe, reliable and efficient operations. Our differentiated portfolio
allowed us to capture a number of market opportunities across the value
chain resulting in significant cash generation and shareholder value
creation,” Garland added.

Refining and Marketing (R&M)

R&M fourth-quarter earnings were $497 million, which included a $564
million impairment of the company’s equity investment in the Melaka
Refinery. Within R&M, Refining recorded earnings of $319 million, and
Marketing, Specialties and Other generated $178 million. R&M adjusted
earnings were $1,096 million, an increase of $927 million from the same
period last year.

Refining’s adjusted earnings were $916 million, significantly higher
than a year ago, largely as a result of improved refining margins. The
company benefitted from improved feedstock advantage with stronger Gulf
Coast and Canadian crude differentials, as well as higher gasoline and
distillate market spreads.

During the quarter, 67 percent of the company’s U.S. crude slate was
considered advantaged, up from 57 percent in the fourth quarter of 2011.
Phillips 66 processed 135,000 barrels per day of shale crude in the
fourth quarter, representing a 97 percent increase over the same period
last year. Clean product yield for the fourth quarter was 83 percent,
with a distillate yield of 40 percent. Compared with the fourth quarter
of 2011, export volumes increased by 5 percent to approximately 140,000
barrels per day as a result of stronger international markets.

Phillips 66’s worldwide refining utilization was 91 percent for the
fourth quarter, down from 94 percent a year ago. This decrease reflects
significant turnaround activity in the Central Corridor and
Western/Pacific regions, as well as adverse impacts from Hurricane
Sandy, primarily at the Bayway Refinery. Pre-tax turnaround expenses
were $84 million, excluding the company’s share of WRB Refining’s
turnaround expense totaling $73 million. In addition, fourth-quarter
expenses related to Hurricane Sandy were $56 million before-tax.

Compared with the third quarter of 2012, worldwide market crack spreads
decreased 33 percent. The impact of this decrease on Refining’s earnings
was mitigated by increased market capture in the fourth quarter due to
the company’s refinery configuration and improved clean product
differentials. Refining’s market capture increased to 95 percent from 79
percent in the third quarter of 2012.

Marketing, Specialties and Other contributed adjusted earnings of $180
million during the fourth quarter, an increase of $38 million from the
prior year. Compared to the same period last year, the company
benefitted from improved margins, partially offset by lower volumes and
higher environmental and legal costs.

While international power production and U.S. marketing volumes were
down in the fourth quarter, the company’s lubricants and specialty
products businesses grew volumes by 16 percent and 14 percent,
respectively.

Midstream

The Midstream segment recorded earnings of $85 million for the fourth
quarter of 2012. Midstream adjusted earnings were $62 million, compared
with $113 million in the prior year. Fourth-quarter earnings related to
the company’s equity investment in DCP Midstream (DCP) were $38 million,
$21 million lower than a year ago. The decrease was due to lower natural
gas liquids (NGL) prices. This decline was partially offset by lower
depreciation expense and improved production mix as DCP increased its
NGL production in liquids-rich basins. Overall, NGL volumes remained
flat.

Adjusted earnings from Phillips 66’s other midstream operations were $24
million for the fourth quarter, compared with $54 million during the
same period last year. The decrease was a result of higher taxes and
less favorable inventory impacts.

Chemicals

Fourth-quarter Chemicals earnings were $246 million, an increase of $98
million from the same period last year, primarily attributable to
improved margins. Externally marketed sales volumes increased to a total
of 5.6 billion pounds in the fourth quarter. The majority of this
improvement was in Olefins and Polyolefins (O&P), in which volumes were
up 8 percent from the fourth quarter last year.

Global utilization for O&P was 90 percent during the quarter.
Utilization rates were negatively impacted by downtime at Saudi Polymers
Company. Excluding this impact, worldwide O&P utilization was near
capacity during the quarter, enabling capture of strong olefins chain
margins.

Corporate and Other costs were $120 million after-tax for the fourth
quarter, including $47 million of net interest expense. Adjusted for
special items, Corporate and Other costs were $92 million after-tax for
the quarter.

Financial Position, Liquidity and Return of Capital

During the quarter, Phillips 66 generated $1.3 billion in cash from
operations. Excluding working capital, operating cash flow was $1.7
billion. The company also funded $894 million in capital expenditures
and investments, including $513 million for its investments in the Sand
Hills and Southern Hills pipeline projects.

In December, the company prepaid $1.0 billion of its amortizing
three-year term loan and ended the year with $7.0 billion of debt and
$3.5 billion of cash and cash equivalents. The company’s debt-to-capital
ratio was 25 percent, improved from 28 percent at the end of the third
quarter. The net-debt-to-capital ratio was 14 percent at the end of the
year.

In the fourth quarter, Phillips 66 returned more than $400 million of
capital to shareholders through $157 million in dividend payments and
$245 million of share repurchases. In December, Phillips 66’s board of
directors approved a 25 percent increase in the company’s annual
dividend rate, raising it to $1.25 per share for 2013. The board of
directors also approved an additional $1.0 billion of share repurchases,
increasing the total repurchase program to $2.0 billion.

Full-year Financial Results

Phillips 66’s full-year 2012 earnings were $4.1 billion or $6.48 per
share. This compares with $4.8 billion or $7.52 per share for 2011.
Full-year adjusted earnings were $5.4 billion or $8.46 per share in
2012, compared with $3.6 billion or $5.66 per share in 2011. The company
generated strong returns with a reported return on capital employed
(ROCE) of 17 percent and an adjusted ROCE of 22 percent.

During 2012, the company generated $4.3 billion in cash from operations.
Excluding working capital, operating cash flow was $5.5 billion.
Phillips 66 funded $1.7 billion in capital expenditures and investments.
In addition, the company paid $282 million in dividends, and repurchased
7.6 million shares of common stock totaling $356 million.

Strategic Initiatives

Phillips 66 remains focused on value creation and growth in its
Midstream and Chemicals segments. As announced in December, the company
intends to form a master limited partnership. A registration statement
is expected to be filed with the Securities and Exchange Commission in
the second quarter of 2013 and, subject to final approval by Phillips
66’s board of directors, an initial public offering is anticipated
during the second half of 2013.

DCP continues to execute its long-term growth plan. In December, the
first phase of the Sand Hills pipeline, which extends from Eagle Ford to
Mont Belvieu, was placed in service. The second phase of the project,
with deliveries from the Permian Basin, is expected to be complete in
the second quarter of 2013. Southern Hills is also on schedule with
service from the midcontinent to Mont Belvieu anticipated by mid-2013.
DCP expects to increase the initial projected capacity of Southern Hills
from 150,000 barrels per day to 175,000 barrels per day.

Chevron Phillips Chemical Company (CPChem) continues to advance several
significant growth projects on the U.S. Gulf Coast, a region with access
to advantaged petrochemicals feedstocks, low energy costs and
established marketing networks to service customers worldwide. CPChem’s
Sweeny fractionation expansion is scheduled to be complete in 2013, and
its 1-hexene project is expected to start up during the first half of
2014. Additionally, CPChem is evaluating an expansion of its normal
alpha olefins capacity at the Cedar Bayou complex in Baytown, Texas, and
expects to make a final investment decision in the third quarter of this
year. Construction of the expansion would be targeted to commence in the
first quarter of 2014, and the project would be completed in the fourth
quarter of 2015. The final investment decision for CPChem’s world-scale
ethane cracker and related polyethylene units is expected later this
year, with projected startup in 2017.

Phillips 66 is enhancing Refining returns by increasing access to
advantaged feedstocks, as well as increasing export capabilities at its
coastal refineries. The company continues to increase the supply of
advantaged crudes to its refineries, supported by investments in
logistics infrastructure and third-party commitments. Phillips 66
expects to process more than 200,000 barrels per day of domestic shale
crude in 2013, an increase from the 2012 average of 112,000 barrels per
day. In January, Phillips 66 entered into a five-year transportation and
logistics contract with Global Partners to move approximately 90 million
barrels of Bakken crude to the Bayway Refinery. The agreement provides a
reliable, long-term alternative to more expensive Brent-priced crudes.
In addition, the first of two chartered Jones Act vessels was delivered
in January, with the second expected to be delivered during the second
quarter of 2013. Both vessels will transport Eagle Ford crude to the
company’s Gulf and East Coast refineries. The initial delivery of
Phillips 66’s 2,000 railcars is expected to occur in early February. The
railcars will be used to transport advantaged crude to the company’s
refineries on the East and West Coasts.

Currently, Phillips 66 has the capability to export up to 285,000
barrels per day of refined products from its domestic refineries. In the
first quarter of 2013, the company expects to complete a project at the
Ferndale Refinery to increase export capacity by approximately 20,000
barrels per day. Through further investment at its facilities on the
Gulf and West Coasts, Phillips 66 expects to increase U.S. export
capability to 370,000 barrels per day by the end of 2013.

Phillips 66 has a history of operating excellence, which includes
personal and process safety, environmental performance, reliability and
cost management, and the company is committed to continuously improving
in these areas. In addition to extensive safety and environmental
programs, the company has implemented an initiative called Optimize 66
to capture $200 million in before-tax savings, as well as additional
value from operational process improvements and efficiencies, by the end
of 2013.

Later today, Phillips 66 Chairman and Chief Executive Officer Greg
Garland, Executive Vice President and Chief Financial Officer Greg
Maxwell and Executive Vice President, Commercial, Marketing,
Transportation and Business Development, Tim Taylor will host a webcast
at 11 a.m. EST to discuss the company’s fourth-quarter performance and
provide an update on strategic initiatives. To listen to the conference
call and view related presentation materials, go to www.phillips66.com/investors
and click on “Presentations and Conference Calls.” For detailed
supplemental information, go to http://www.phillips66.com/EN/investor/financial_reports/earnings_reports/Pages/index.aspx.

Earnings

Millions of Dollars

Fourth Quarter

Twelve Months

2012

2011

2012

2011

Refining and Marketing (R&M)

Refining

$

319

$

64

$

3,158

$

1,533

Marketing, Specialties and Other

178

1,737

571

2,315

Total R&M

497

1,801

3,729

3,848

Midstream

85

113

6

403

Chemicals

246

148

823

716

Corporate and Other

(120

)

(51

)

(434

)

(192

)

Phillips 66

$

708

$

2,011

$

4,124

$

4,775

Adjusted Earnings

Millions of Dollars

Fourth Quarter

Twelve Months

2012

2011

2012

2011

Refining and Marketing (R&M)

Refining

$

916

$

27

$

3,785

$

1,975

Marketing, Specialties and Other

180

142

699

689

Total R&M

1,096

169

4,484

2,664

Midstream

62

113

286

403

Chemicals

246

148

980

716

Corporate and Other

(92

)

(51

)

(363

)

(192

)

Phillips 66

$

1,312

$

379

$

5,387

$

3,591

About Phillips 66

Headquartered in Houston, Phillips 66 is an advantaged downstream energy
company with segment-leading Refining and Marketing (R&M), Midstream and
Chemicals businesses. The company has 13,500 employees worldwide.
Phillips 66’s R&M operations include 15 refineries with a net crude oil
capacity of 2.2 million barrels per day, 10,000 owned or supplied
branded marketing outlets, and 15,000 miles of pipeline systems. The
Midstream segment includes Phillips 66’s 50 percent interest in DCP
Midstream, LLC, one of the largest natural gas gatherers and processors
in the United States, with 7.2 billion cubic feet per day of gross
natural gas processing capacity. Phillips 66’s Chemicals business is
conducted through its 50 percent interest in Chevron Phillips Chemical
Company LLC, one of the world’s top producers of olefins and polyolefins
with more than 30 billion pounds of net annual chemicals processing
capacity across its product lines. For more information, visit www.phillips66.comor follow us on Twitter @Phillips66Co.

CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This news release contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
which are intended to be covered by the safe harbors created thereby.
Words and phrases such as “is anticipated,” “is estimated,” “is
expected,” “is planned,” “is scheduled,” “is targeted,” “believes,”
“intends,” “objectives,” “projects,” “strategies” and similar
expressions are used to identify such forward-looking statements.
However, the absence of these words does not mean that a statement is
not forward-looking. Forward-looking statements relating to Phillips
66’s operations (including joint venture operations) are based on
management’s expectations, estimates and projections about the company,
its interests and the energy industry in general on the date this news
release was prepared. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions
that are difficult to predict. Therefore, actual outcomes and results
may differ materially from what is expressed or forecast in such
forward-looking statements. Factors that could cause actual results or
events to differ materially from those described in the forward-looking
statements include fluctuations in crude oil, NGL, and natural gas
prices, refining and marketing margins and margins for our chemicals
business; unexpected changes in costs for constructing, modifying or
operating our facilities; unexpected difficulties in manufacturing,
refining or transporting our products; lack of, or disruptions in,
adequate and reliable transportation for our crude oil, natural gas,
NGL, and refined products; potential liability for remedial actions,
including removal and reclamation obligations, under environmental
regulations; potential liability resulting from litigation; limited
access to capital or significantly higher cost of capital related to
illiquidity or uncertainty in the domestic or international financial
markets; and other economic, business, competitive and/or regulatory
factors affecting Phillips 66’s businesses generally as set forth in our
filings with the Securities and Exchange Commission, including our Form
10 Registration Statement. Phillips 66 is under no obligation (and
expressly disclaims any such obligation) to update or alter its
forward-looking statements, whether as a result of new information,
future events or otherwise.

DISCLOSURES UNDER RULE 135

A registration statement relating to the common units of the MLP that
would be sold in the offering referred to above is expected to be filed
with the Securities and Exchange Commission, but has not been filed or
become effective. This news release does not constitute an offer to
sell, or the solicitation of an offer to buy, any securities. This news
release is being issued pursuant to, and in accordance with, Rule 135
under the Securities Act of 1933.

Use of Non-GAAP Financial Information -- This press release
includes the terms adjusted earnings, adjusted earnings per share,
operating cash flow excluding working capital, and net-debt-to-capital
ratio. These are non-GAAP financial measures. Adjusted earnings,
adjusted earnings per share, and operating cash flow excluding working
capital are included to help facilitate comparisons of company operating
performance across periods.The net-debt-to-capital ratio reduces
debt and capital by the amount of cash and cash equivalents shown on the
balance sheet for the reflected period, and is presented to reflect the
net results if the company elected to utilize its cash balances to
reduce debt in the future.

References in the release to earnings refer to net income
attributable to Phillips 66.

Reconciliation of Earnings to Adjusted Earnings

Millions of Dollars

Except as Indicated

2012

2011

4Q

Year

4Q

Year

Consolidated

Earnings (loss)

$

708

$

4,124

$

2,011

$

4,775

Adjustments:

Net (gain) loss on asset sales

-

(106

)

(1,660

)

(1,545

)

Impairments

580

979

-

318

Canceled projects

-

-

28

28

Severance accruals

-

-

-

15

Pending claims and settlements

(23

)

34

-

-

Premium on early debt retirement

-

89

-

-

Repositioning costs

12

55

-

-

Repositioning tax impacts

-

177

-

-

Hurricane-related costs

35

35

-

-

Adjusted earnings

$

1,312

$

5,387

$

379

$

3,591

Earnings per share of common stock (dollars)*

$

1.11

$

6.48

$

3.17

$

7.52

Adjusted earnings per share of common stock (dollars)*

$

2.06

$

8.46

$

0.60

$

5.66

* Assumes the dilutive securities outstanding at April, 30 2012
were also outstanding for each of periods prior to the separation.